Meat firms told business as usual won't cut it in China
Kitchens with no ovens. Consumers rejecting boneless cuts of meat for their dinner in favour of bony feet or wings. Household food shopping done online.
These are some of the differences in consumption habits that New Zealand meat exporters must understand and cater for as they develop their connections with China.
Peter Russell, of New Zealand's Alliance Group, has recently returned from an immersion trip to China, where he saw first-hand how Chinese consumers eat New Zealand red meat and how restaurant chefs cook it.
He said exporting to China required a different approach to sending meat to the UK or Australia.
"We knew that Chinese households don't have ovens but a lot of people think they do. Unlike Mother England where you can send off great big legs or shoulders to be roasted, they don't cook their meat that way. Most people presume that other countries consume their protein in the same way we do but it's radically different. Sending to China what we sent to the UK would be a grand mistake."
Many Chinese households had the same pressures as those in New Zealand, he said. Working parents were time-poor and wanted quick dinner options.
He said lamb rolls were popular, which looked like rolled up ham but were made of lamb flaps and put into a hot pot with vegetables as a communal way of eating.
Chinese consumers also preferred meat with a bone in it, he said. He said chicken claws or buffalo wings might sell for double the price of a chicken breast. "It's completely flipped the other way. Straight meat is not that interesting, there's a strong feeling that the best meat has a bone in it somewhere."
There has been a steady increase in meat exports to China over recent years, from $597 million in 2013 to $1.167 billion in the year ended March this year.
That now represents almost 20 per cent of all New Zealand meat exports and 11.7 per cent of exports to China.
"Ongoing increases in the size of the middle class and income levels in China are likely to continue driving growth in demand for meat, although I wouldn't expect future growth to be as strong as it has been over the last few years. As with dairy, China will be keen to ensure that it is not too reliant on one source of product," said Infometrics chief forecaster Gareth Kiernan.
Mike Arand, New Zealand Trade and Enterprise's China business adviser for its Greater China team, said Chinese consumers had a lot of trust in New Zealand product, which was seen as being quality, safe and produced in a clean environment.
But he said New Zealand firms had to supply meat in the format that customers wanted, compete with other international players and carve out a red meat niche in an environment where pork and chicken were still the most commonly eaten meats. "One of the key challenges is around understanding the consumers there. Shipping what we've always shipped and hoping it will sell is not the best thing."
Supply and distribution, particularly to China's relatively smaller centres, was sometimes difficult and expensive, he said. Goods passed through a number of layers of distributors and importers before it reached the consumer and margins were collected at each point.
Russell said China was also scaling up its own domestic red meat production, which would require New Zealand producers to work to add value over time. "Long-term I think we need to keep building our brand New Zealand and our individual brands.
"It would be unwise to simply rely on that market as a commodity market… meal-ready solutions and value-added products have huge growth potential."
Kiernan agreed: "Perhaps the main way of achieving growth in the value of meat exports to China going forward will be more around a lift in the quality, rather than the quantity, of exports.
"I would expect to see demand transition towards higher-value cuts as consumer tastes in China gradually become more westernised and incomes lift, enabling consumers to be able to afford more expensive cuts of meat."
Russell said online purchasing was also big business in China. Modern households would order food online rather than go to the markets their parents might have frequented, he said.
Antje Fielder, a senior lecturer at the University of Auckland Business School, has done work on New Zealand businesses engaging with China and said many did not succeed,
She said people assumed that because the population of China was 1.3 billion it should be a simple matter to corner 1 per cent of the market and achieve success. "It's not that easy.'
It was important that New Zealand firms had good channels to reach the Chinese market and a clear idea of who their target consumer in China was, she said.
Some New Zealand companies were overly reliant on their Chinese business partners, she said, and when those relationships fell through their businesses suffered.
She interviewed 100 New Zealand firms dealing with China and found more than 50 per cent had experienced major issues. Some had tried again but she said the failure rate was higher than researchers had anticipated.